Edison Terra Filho

EXECUTIVE VICE PRESIDENT, BRASKEM

Braskem is the largest petrochemical company in the Americas and the largest producer of thermoplastic resins in the region. What are the reasons for its success?

It is due to the culmination of our consolidating of the market in Brazil, combined with the opportunity to purchase assets in the United States and our commitment to serving customers with products and services that they really need. We started our mission to consolidate the Brazilian petrochemicals industry in 2002 and finished the process by 2010. Braskem believed that by doing this we would improve the competitiveness of the industry.

After we achieved this, we decided that our strategy should be to go south-north, i.e. expanding our frontiers outside of Brazil. We already had commercial positions in the region and then, in 2010, we had the opportunity to buy Sunoco’s polypropylene (PP) assets in the United States. A few years later we acquired Dow’s PP assets in the United States and Europe, which gave us leadership of the US PP market. In recent years our strategy has been to diversify geographically as well as in terms of feedstock, moving from naphtha to gas. For this reason we decided to launch the Braskem Idesa Petrochemical Complex in Mexico, where we made a total investment of $5.2 billion.

How important is Mexico to Braskem’s business strategy?

Historically, the Braskem Idesa Petrochemical Complex has been our most significant greenfield investment and a major step for us in North America. It is very competitive and it is the first new project based upon shale gas-priced feedstocks. It really put us on the map in terms of the polyethylene industry in North America.

Why is Braskem looking to diversify its feedstock sources?

Around 2011-2012, there was a huge gap in the cost of ethylene produced from naphtha compared to gas. With oil prices going through the roof, the naphtha crackers lost a lot of competitiveness. The idea behind using both feedstock types is to be competitive in both scenarios, i.e. even with oil prices much higher than gas prices and vice versa. We are seeing that things will be more or less at the same level in the long run, therefore besides diversification we are also trying to have more flexibility at our crackers so we can use either feedstock.

For instance, this is why we are making an R$ 380 million investment which will come on stream at the end of this year to have 15% flexibility at our cracker in Camaçari, Bahia, where we will be able to use local or imported naphtha or imported ethane from the United States.

Do you see South American feedstock becoming as competitive as the US’ after the development of Brazil’s pre-salt reserves and shale gas in Argentina and how will this affect Braskem’s investments?

With these developments, there will be plenty of room for competitive feedstock in the future. Wherever there is competitive feedstock in South America we are interested in investing and to make profitable investments we need a good combination between competitive feedstock and demand. Latin America as a whole has a good potential to grow, mainly in terms of the utilization of plastics as the PE and PP consumption per capita is much lower than the average. Also, there is a lot of opportunity for economies that have been performing badly to improve and we believe they have now past the bottom of the downward curve. Brazil’s initiative to liberalize its gas market is positive as it gives Petrobras the option to invest but also the opportunity for others to participate.

How do you expect Braskem to have changed in five years’ time?

Our five year investment plan includes a $675 million brownfield investment in the United States that comprises of a new 450,000 kt/y PP asset which is due to come on stream in the first half of 2020. We are also making investments in renewables. Besides our Green PE production, we have just announced a partnership with Haldor Topsoe to develop a demo plant for green MEG (Monoethylene glycol) technology. There is also a pipeline of investments in our green portfolio which we expect to mature in the coming years. We are also increasing our focus on recycling and have a platform in Brazil called ‘Wecycle’ in order to boost circular economy in the plastics chain in partnership with our customers and mechanical recycling service providers, which we think is very relevant.

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